Stocks Close Firmly Negative Amid Global Economic Worries

3/22/2012 4:27 PM ET

After showing a lack of direction throughout the previous session, stocks moved mostly lower during trading on Thursday. Renewed worries about the global economic outlook weighed on the markets, although another batch of upbeat U.S. data helped to limit the downside.

The major averages ended the session off their worst levels of the day but still closed firmly in the red. The Dow fell 78.48 points or 0.6 percent to 13,046.14, the Nasdaq slipped 12.00 points or 0.4 percent to 3,063.32 and the S&P 500 dropped 10.11 points or 0.7 percent to 1,392.78.

The weakness on Wall Street was largely due to the release of some disappointing economic data from overseas, including a report showing a continued contraction in Chinese manufacturing activity.

A report from HSBC showed that its index of activity in the Chinese manufacturing sector fell to 48.1 in March from 49.6 in February, with a reading below 50 indicating a contraction. With the drop, the index suggested that Chinese factory activity shrank for the fifth consecutive month.

Adding to the negative sentiment, a report from Markit Economics indicated that Eurozone private sector activity fell more sharply than expected in March.

Markit Economics said that its composite output index for the Eurozone fell to a three-month low of 48.7 in March from 49.3 in February.

The disappointing overseas data overshadowed a report from the Labor Department showing that U.S. initial jobless claims fell to a four-year low in the week ended March 17th,

The report showed that initial jobless claims fell to 348,000 from the previous week's revised figure of 353,000. The drop surprised economists, who had expected jobless claims to edge up to 352,000 from the 351,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since coming in at 347,000 in the week ended March 8, 2008.

A separate report from the Conference Board showed that its index of leading U.S. economic indicators rose by slightly more than expected in February, pointing to a more positive outlook for U.S. economic activity in the first half of 2012.

Among individual stocks, shares of FedEx (FDX) came under pressure even though the delivery giant reported better than expected adjusted third quarter earnings and provided upbeat full-year guidance. FedEx fell by 3.5 percent amid the concerns about demand in China.

In overseas trading, stock markets across the Asia-Pacific region turned in a lackluster performance on Thursday, ending the day mixed. Japan's Nikkei 225 Index rose by 0.4 percent, while China's Shanghai Composite Index edged down by 0.1 percent.

Meanwhile, the major European markets all showed notable moves to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.8 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.3 percent and 1.6 percent, respectively.

In the bond market, treasuries moved modestly higher amid the global economic worries. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.9 basis points to 2.275 percent.

While most of the major sectors moved to the downside on the day, steel stocks saw substantial weakness amid concerns about the outlook for global demand. The NYSE Arca Steel Index tumbled by 3.3 percent, pulling back further off Monday's one-month closing high.

U.S. Steel (X) and Mechel (MTL) turned in two of the steel sector's worst performances, with both stocks falling by 5.8 percent.

Considerable weakness was also visible among oil service stocks, which moved lower along with the price of crude oil. With crude for May delivery sliding $1.92 to $105.35 a barrel, the Philadelphia Oil Service Index closed down by 2.7 percent.

Transportation stocks also came under significant selling pressure on the day, dragging the Dow Jones Transportation Average down by 2.1 percent. Overseas Shipholding Group (OSG) and Con-Way (CNW) posted steep losses.

Gold, housing, and healthcare provider stocks also showed notable moves to the downside, while some electronic storage stocks bucked the downtrend.

Housing data is likely to be back in focus on Friday, with the Commerce Department scheduled to release its monthly report on new home sales. Economists expect new home sales to edge up to an annual rate of 325,000 in February from 321,000 in January.

Trading could also be impacted by reaction to earnings news from Nike (NKE) and Accenture (ACN), which are reporting their quarterly results after the close of trading.